Why the Wirecard scandal could become a complicated affair for the Berlin government

The federal government's support for Wirecard to enter China and contacts between the Bavarian company and lobbyists close to the secret service put pressure on government circles in Berlin. What did the Ministry of Finance and the Berlin Chancellery know about the real situation of the company? The well-informed German Foreign Policy reconstructs the Wirecard affair and the responsibilities of Berlin's political circles.

Talks with the Secretary of State

After the outbreak of the "Wirecard case" the German Ministry of Finance ended up at the centre of public debate. The Ministry is responsible for monitoring the Federal Financial Supervisory Authority (BaFin), which in early 2019, after a detailed investigation of Wirecard's irregularities by the Financial Times, reacted by even helping the Bavarian company with a ban on "short selling" the share and at the same time lodging a complaint against the investigating journalist and also subjecting the company to a simple inspection by the Deutsche Prüfstelle für Rechnungslegung (DPR), which was not expected to lead to any results [1]. The Board of Directors of BaFin is headed by Jörg Kukies, Secretary of State at the Ministry of Finance. As Kukies recently confirmed to the Chairmen of the Bundestag Finance Committee, he has been keeping Minister of Finance Olaf Scholz updated on developments in the Wirecard case since early 2019. He also had at least two talks with Wirecard CEO Markus Braun, one on 4 September, and one on 5 or 15 November 2019. The Ministry kept the content of the talks secret; it is also said that no minutes were taken after the November meeting [2]. This circumstance is even more controversial since BaFin, under its Chairman of the Board of Directors, Kukies, even for formal reasons alone, should have continued to keep Wirecard under observation.

The entry into the Chinese market

That November 5, 2019 Wirecard had a strategically important success: its entry into the Chinese market. As announced by the Bavarian company, in fact, just that day, an agreement had been reached for the acquisition of the Chinese payment processor AllScore Payment Services, initially at 80%; the remaining 20% would be acquired two years later. The full acquisition was only possible after Beijing, during a visit by Finance Minister Scholz in January 2019, confirmed that as part of the initiative for the "German-Chinese Financial Dialogue" it would welcome German companies "into the Chinese payment services market" - a step towards further opening up China to foreign investment, as repeatedly requested not only by the German government. [3] It is even more noteworthy that the German side has started to deepen economic cooperation through a company whose activities are now considered one of the most serious cases of fraud in the history of the German economy and which, moreover, has taken over a Chinese company already targeted by the Chinese authorities because of numerous illegal transactions, in particular because of the handling of gambling payments, which is prohibited in China. As a result, AllScore Payment Services was condemned in April to pay the biggest fine ever imposed in the sector to date, amounting to USD 9.3 million [4].4 Why the Wirecard scandal could become a complicated affair for the Berlin government

Accompanied by the Chancellery

On the German side, the agreement had been concretely prepared not only by the Ministry of Finance, but also by the Berlin Chancellery Office (Kanzleramt) - on the initiative of a former Federal Minister, now active as a lobbyist: Karl-Theodor zu Guttenberg, who had already served as Federal Minister of Economic Affairs in 2009, and from 2009 to 2011 as Federal Minister of Defence, and who is currently head of the consulting firm Spitzberg Partners in New York, which he founded. According to press reports, Guttenberg's colleague at "Spitzberg Partners", Urs Gatzke, who was responsible for the Washington office of the Hanns-Seidel-Foundation (CSU) from 2004 to 2013, had asked the Ministry of Finance by telephone and e-mail to inform the responsible government offices in Beijing of Wirecard's interest in entering the Chinese market. The request, it is said, was granted in June 2019 by Secretary of State Wolfgang Schmidt, Scholz's "closest confidant". [5] On 3 September 2019, just before a trip by the German Chancellor to the People's Republic, Guttenberg had discussed it personally with Angela Merkel. Subsequently, he informed Merkel's closest economic advisor, Lars-Hendrik Röller, by e-mail about the planned entry of Wirecard into the Chinese market and asked for "accompanying measures" [6]. In the meantime, the Federal Government admitted: 'the Chancellor raised the issue of the acquisition of AllScore by Wirecard during her trip to China'. On 8 September, after the Chancellor's return, Röller had written in an e-mail to Guttenberg, according to a government spokesman, that "the matter" had been "raised during the visit to China" and "further accompanying measures" had been taken [7].

Evidently informed

The Chancellery was evidently aware of the serious accusations made against Wirecard, accusations that had already led to investigations by a public prosecutor's office, not in Germany, but in Singapore; and Singapore is one of the countries where Wirecard had freely chosen to park its billionaire balances on credit, completely invented balances. On August 13, the Chancellery had also received a request from its former official Klaus-Dieter Fritsche, in which he - like Guttenberg, active as Wirecard's lobbyist - asked for an appointment to discuss the company in Aschheim. The Chancellery had then requested more detailed information about Wirecard from the Ministry of Finance, which he received by e-mail on 23 August [8]. In this e-mail, the Ministry of Finance also referred to 'already publicly known allegations against the company', confirms a government spokesman. The documents received by the Chancellery as an attachment to the e-mail of 23 August referred, among other things, to 'allegations of money laundering and market manipulation' - which, however, were not an obstacle for Röller and Merkel in paving the way for Wirecard to enter China.

Secret Service contacts

There are many questions still open about Fritsche's role in the affair. From 1996 to 2005, he was vice-president of the Federal Office for the Protection of the Constitution (Bundesamts für Verfassungsschutz, BfV), before becoming secret service coordinator at the Chancellery at the end of 2005; at the end of 2009 he then moved on to the Ministry of the Interior as state secretary, before returning to the Chancellery at the beginning of 2014 - now as commissioner for the federal secret services. He held this post until his retirement in March 2018. It is also said that Jan Marsalek, the alleged mastermind behind the Wirecard fraud, had intensive contacts with the secret service. In this regard, Stephan Thomae, Vice-Chairman of the FDP parliamentary group in the Bundestag and member of the Parliamentary Control Committee (PKG), responsible for the secret services, asks that "in this context" the "role" played by Fritz in the case also be "discussed". [9] Thomae calls for a special meeting of the PKG to that end.

FPÖ and the defence of the constitution

It is known that Fritsche was hired by the Austrian Ministry of the Interior at the beginning of 2019 under the leadership of the then Minister Herbert Kickl (FPÖ) as an advisor to carry out the "development" of the Austrian Office for the Defence of the Constitution [10]. At the same time, Marsalek reportedly not only knew the former party leader Heinz-Christian Strache, but also met his then intimate Johann Gudenus several times and had close contacts with the FPÖ. During Kickls' tenure at the Austrian Ministry of the Interior, Marsalek had also promoted a project; press research identified him as a liaison man who intercepted information from the Austrian Office for the Protection of the Constitution and passed it on to the FPÖ.[11] It has not yet been clarified, however, whether Marsalek also had contacts with Fritsche.

[1] S. dazu Der Fall Wirecard.

[2] Tim Bartz, Anne Seith, Gerald Traufetter: Finanzministerium sprach mit Wirecard-Chef über brisante Sonderprüfung. spiegel.de 15.07.2020.

[3] Joint Statement of the 2nd China-Germany High Level Financial Dialogue. Beijing, 18.01.2019.

[4] Zhang Yuzhe, Guo Yingzhe: Central Bank Imposes Another Record Penalty on Payment Provider. caixinglobal.com 08.05.2020.

[5] Der Mann, der vieles wusste. spiegel.de 24.07.2020.

[6] Eckart Lohse: In die Offensive. Frankfurter Allgemeine Zeitung 23.07.2020.

[7] Sven Becker, Rafael Buschmann, Nicola Naber, Gerald Traufetter, Christoph Winterbach, Michael Wulzinger: Kanzleramt setzte sich für Wirecard ein. spiegel.de 17.07.2020.

[8] Eckart Lohse: In die Offensive. Frankfurter Allgemeine Zeitung 23.07.2020.

[9] FDP beantragt Sondersitzung des Geheimdienstausschusses. spiegel.de 24.07.2020.

[10] Stefan Buchen: Rechtsabbieger: Der neue Job von Merkels Geheimdienstmann. daserste.ndr.de 07.03.2019.

[11] Anna Thalhammer: Flüchtiger Wirecard-Manager war geheimer FPÖ-Informant. diepresse.com 09.07.2020.